Wall Street Weekly | 07/04/2009 9:40 am

Hot Dogs, History and Hope for the Future, by Liz Peek

By Liz Peek

Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 6/29)

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Happy Independence Day! Between the cookouts and bike parades, I always try to sneak in a few minutes over this holiday to contemplate the Declaration of Independence, and to think about the birth of this great nation. Although my imaginings of those gatherings in Philadelphia have undoubtedly been colored by one too many viewings of the musical "1776," reading about the key players of the time leaves no doubt that they were indeed extraordinary men.

Thomas Jefferson and John Adams probably did not frequently break into song. They did, however, possess great learning, idealism and courage. They were also, for the most part, selfless. I wish they walked among us now.

Today, our country is again under siege. We have overcome huge obstacles in the past – the British, World Wars, Depressions and massive shifts in the economy – because we found the leaders and the skills to succeed. What about this time?

As this week’s employment report confirms, we still face major challenges. In June, the country shed another 467,000 jobs – much worse than expected, bringing the unemployment level to 9.5%.

Since the beginning of the recession last year, the U.S. has lost 6.5 million jobs – truly a disaster for so many families, and also for the prospects of a near-term rebound. It continues to be the highest-paying jobs – those in manufacturing – that are hardest hit. Some 136,000 in that field lost work last month, along with 79,000 in construction.

Employment is a lagging indicator, as we all know. Still, the persistent bad news on this front makes the hoped-for second-half recovery less likely. It also casts doubt on the effectiveness of the stimulus program undertaken by President Obama. Though opinion has been split on the potential of that $787 billion initiative, it probably boosted the nation’s confidence at a critical time. That alone was worth something. Ironically, since the administration has attempted recently to ram through a slew of other massive programs such as health-care reform and cap-and-trade, the country’s enthusiasm for deficit spending has vanished. The surprising downturn in consumer sentiment in June, to 49.3 from 54.8 in May, attests to this. Americans are not stupid. They see spending and deficits soaring, and understand the consequences.

As I wrote several weeks ago, the stock market is now weighing the shape of the bounce-back. In the second quarter we enjoyed a nice surge in the market averages, as investors decided that clocks would keep ticking, but for further gains, we need confidence that we will find an engine of growth.

The head of the Council of Economic Advisors, Christina Romer, surprised me this past week by reiterating her forecast of a V-shaped recovery. I really cannot see where that will come from. There are some short-term factors, such as inventory restocking, that will boost the numbers going forward, but it is hard to see a surge in spending by either consumers or by businesses anytime soon. The consumer is simply tapped out. The slow growth in jobs and wages over the past decade meant that consumers funded spending through borrowing. That is over, and instead many people now face debt problems and rising taxes. Businesses are in better shape, but extremely low utilization rates suggest that any surge there is unlikely.

I hope I’m wrong, and that an upturn in China and other emerging markets will fuel exports from the U.S., and that the early-stage (and potentially very damaging) protectionism that we’ve seen from the union-obliged Obama team is abandoned. It’s also possible that businesses find investment opportunities in the tech sector. The bad news is that most of the breakthroughs taking place there seem to do with providing consumers with an ever-greater range of entertainment on their cell phones. That doesn’t seem very productivity-enhancing to me. In fact, I imagine it’s quite the opposite.

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Today’s Houston Chronicle has another take on education. In Texas, more than 80% of all jobs do not require a bachelor’s degree, and 44% of those jobs pay above average income for the state. Texas currently is in need of welders and other skilled technicians. My cousin is in the cattle business and frequently hires free lance cowboys and pays them well.

I agree that education should be on the front burner , regardless of the person in the Oval Office. A hunk of that stimulus money is going to education; the President also favors a longer school year and school day, and better trained teachers.

All schools should place more emphasis on math and science, so those students not going on to college will be better prepared to apply their skills in industry and technical training. There is a great need in those fields. When my young nephew was laid off from his job, he took a job with one of the oil companies, inspecting pipe. His marketing degree from the university was not useful there.

When your car breaks down, you want a mechanic not the guy with the bachelor or master’s degree. When you flip the switch and there is no light, you call an electrician. No one ever argues with a plumber’s fee when the toilet is backed up.

One size doesn’t fit all. Kids not wired for college level need to be shown new and important career choices, or that drop out rate will just climb higher. For far too long, tactile learning has been pushed aside and undervalued. The diversity of student needs must be addressed and the time is now. Our schools have wasted too many kids. It’s shameful.

An aside… a round of applause for Bill and Melinda Gates who advocate and finance smaller high schools where students are more apt to get more attention from their teachers.

By Maggie W on 07/04/2009 10:13 am

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Maggie, you ‘hit’ on something a group of "us" were discussing about education in Texas, yesterday - a state group trying to change things here, and elsewhere. For many years, a few of us in the "group" have written about the tragic practice of moving students into centralized "junior highs" in 6th grade from their neighborhoods. My focus was biological - having worked with ISDs for years in re teen pregnancy (and OB).

Moving students into new environments, often from a paltry number of "old friends since kindergarten" to 1000+ student buildings created schools dripping with new hormones. Then, we, supposed knowledgeable adults, educators, medical experts, wonder why "those kids" become sexually active? Unbelievable (adults aren’t any more controlling but for access to the drug stores)!

How we can keep students in their own "neighborhood" schools is an enormous task. The first thing we heard over the years was, "What? And throw out integration?" My response to that, having run many clinics in low socioeconomic neighborhoods, and knowing the residents very well was, "Bus the teachers! Busing was created to level out educational advantages and no parent wants their children sent across town, away from their home area … " (That being said, some students may opt for specialized education [arts, science, etc], but if we bussed teachers instead of students, that would be solved, too.

It’s too easy to put sex in front of young people and let them deal with it, and then blame them.

What no one realizes is that our bodies function to reproduce in adolescence. The Child Labor Laws stopped that - and because of those laws, as much as they were needed, the children had nothing to do, so … compulsory education was established to keep kids off the streets, thus extending reproduction age to suit adult goals.

Perhaps, as you touched on, we should create a system where education was possible at any time, and young people could follow their biological clocks - huh? (read the history of Summerhill in the UK). If we remember history at all, young couples used to live with their original families when they married, and bore children, until they could move forward, on their own. We have messed up biology!

By C jay on 07/04/2009 11:11 am

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The world is more complex now, so our options have changed. Education is stuck in the same old rut. We house children in schools that were bulit in the 50’s, and the teaching methods haven’t changed much either. A few years back, I taught a computer tech class . Many of those kids didn’t even know what a tool bar was. As time went on, we had "pen pals" in other states and countries, they chose to research what interested them ( not what interested me), and we spent much time researching careers. Every 8 weeks, I loaded them on a bus and took them to meet people in those careers. The class was a success. Of course, they also tried to access porn, but that’s what teens do, and it was easy to take care of. Classes started at 8:15, but I usually arrived at 7:00. There were always some kids sitting in my parking place, wanting to come in early to log on. Then, the grant ran out, and there went the program. In its place was a TAKS test prep class.

Circle A, B. C. D.

Two years ago, I’m was at a mall and a young man walked up to me. He looked familiar. He had been in my class and wanted me to know that because of it, he was a dessert chef at a large hotel. He invited me to the restaurant, and dinner was on the house. I was very proud of him,but more important, he was very proud of himself.

There are many teachers with success stories. They all have three things in common. In their classrooms, there is one -on -one teacher/student time with much dialogue . There are various strategies at work. Also, students are allowed to move and talk with one another, the teacher, and often question, challenge, and argue points. Just like real world jobs. As for learning how to argue and make points, that was once taught in speech/debate classes. Those have been scrapped, too. You know what classes have taken their places, don’t you?

By Maggie W on 07/04/2009 12:06 pm

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I do know, Maggie, and it is sad because excellent biology/science courses would take care of "that," as well as the accompanying self-esteem wrought by knowlege. ;-))

One of our challenges is population, numbers, and density. I often wondered what would have happened to "busing" had students been bussed in and out of rural, small town areas, and vice verse say 2.5 days out of 5, to help them identify with local culture, and … view how the other half of the local whole exists. In teaching science in schools with high pregnancy rates, we could lower that rate within a year by 40% - through teaching women’s health, utilizing experienced science professionals. It was awesome, and the principals were delighted. ;-)) The courses soon had to accept everyone and anyone in the catchment areas, including grandmothers, boyfriends, siblings - but, hey, what we we doing there but increasing knowledge that led to increased self-respect (the boys lead in the ladder, actually).

Nice "chatting" with you, MW.

By C jay on 07/04/2009 3:51 pm

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Hi Maggie……I’m curious — which classes have taken the place of speech/debate classes — they don’t teach speech and debate in high school anymore? I’m an adjunct faculty member for several universities — almost every class requires an oral presentation in addition to the final paper/project…………..

By MK P on 07/05/2009 8:33 am

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MK, I believe that is true primarily in middle schools. Classes like speech, woodshop, health, and even art in many schools have been scrapped for test prep classes for springtimes’ big state mandated tests. Principals are all over extra hours of test prep for each student because the school gets recognition, the principal gets a bonus, and he/she may get a promotion. Those are the classes kids skip most often in my state. The schools that seek and are awarded big grants offer many enrichment classes and after school activities. But few schools are so lucky.

But if kids do not have the exposure , the introduction, and the prior knowledge that comes from middle school, many will not take those classes at high school level. Kids who enjoyed choir in middle school are probably going to sign on in high school, too.

By Maggie W on 07/05/2009 9:18 am

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CJ - I was so joyed to read that you have a group taking on the practice of moving 6th graders into junior high!! i remember being shocked when that first started happening in the country. Just a ridiculous thing to do. that is simply to young to mix with 9th graders. period.

By Chrome Toe on 07/05/2009 10:53 am

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Don’t hold your breath, Chrome Toe, this group’s been at it since the 70s when I first raised the issue. They called me "back in" this year, and frankly, the Texas legislature marches only to outside drummers. No one really cares about children.

We have been fighting the abuse of kids in a county school in west Texas this year. CPS, and the state will do nothing, or would the local Sheriff’s office. Two teachers have stepped forward offering to talk to anyone to stop the abuse (even a 5 year old forced to exercise so much vomiting began, and nothing has been done to protect the child).

Everyone says, "the parents have to report this …" What has this nation come to? Most parents are terrified of school authorities.

By C jay on 07/05/2009 12:55 pm

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Maggie, the need for fundamental jobs like auto mechanic and manufacturer is something we in Michigan have been pointing out for a long, long time (as we watch our manufacturing relocate overseas). There are a couple of caveats that need mentioning: 1) there is no lack of schooling in the sciences, but there is a lack of demand for scientists and engineers in the US marketplace. A recent Urban Institute study found that there are about three times as many graduates in science and engineering as there are jobs. The two out of three who don’t get placed end up switching fields within a few years of graduation (personal observation - an undergrad classmate of mine landed a nice aerospace job with one of the majors after getting his bachelor degree and within two years got married, bought a house, had a child on the way, then got laid off. While I was still in grad school he was returning to get his MBA because our field was suddenly shrinking - companies merging or buying each other out, cutting what they saw as redundant expenses when they did. Whoever dreamed Boeing and McDonnell Douglas would become one company? Or Northrup and Grumman, or Martin Marietta and Lockheed? Imagine GM and Toyota, Ford and Honda, Chrysler and Nissan merging and you get the picture - massive job losses through corporate consolidation. This is happening in other manufacturing and research and development based fields, too (e.g. Wyeth and Pfizer). The emphasis has shifted from R&D to profit-making. As a result there is less R&D money and, long range, less product being developed for the future market. Other nation’s haven’t been so short-sighted and are eating our lunch.

Exports from the US to China? What a joke. That trade imbalance is so severe it’s insane. Why? Because the US has abandoned manufacturing and R&D as a sacrifice to Wall Street’s profit gods. Not only do we not have any electronics manufacturing here for our diversionary, disposable income sucking toys we don’t even provide our own fundamentals such as clothing.

I’m really sick and tired of idiots who believe the stock market truly reflects the health and wealth of the nation.

By Karen R on 07/04/2009 11:59 am

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Karen, I hear you. A friend of mine relocated here ( Texas) 15 years ago. When he goes home to visit Michigan relatives, he comes back and is depressed for a month. He likes Texas just fine ( even says ‘ya’ll’ now) but misses his home state. He is finally realizing that he will never be able to go home again. That is sad. One year, a relative sent him a box. It was Fall of the year; the box was full of beautiful multi colored leaves.

I don’t even like to see or hear the word " China". What the heck do we have that China needs? You are so right; what a joke! And don’t even get me started on NAFTA. What happened to those clauses in that agreement that were supposed to protect American workers?

By Maggie W on 07/04/2009 12:29 pm

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aaack! I hope a future revamp of these comment boards come with an edit button for those of use who don’t re-read enough before submitting.

By Karen R on 07/04/2009 1:08 pm

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Karen, did you read the book about our products being imported from China because we outsouced them to China? I can’t remember the name of it - but, we do the best in R but not in D … that’s how Japan got ahead of us in "D," in fact. ;0)) The Chinese tried hard to catch up with us, openly, hoping to do so before Hong Kong "went back," in fact, they were here working with many of us via the International Trade Association, sincerely concerned because Hong Kong’s leader was the only U.S. educated professional left, and they knew the attitudes of the old senior leaders in China toward the U.S.

That is why Clinton increased trade with China - the money kept that same aggressive group happy. Had he not done that …we would not be "where" we are today - safe, so far. Right now, though, in the U.S. we have far too many small groups yelping too loudly, a verbiage without offering solutions - wordsmithing according to a doctrine put out for such a "cause" that does nothing but serves to triangle us against one another. Not good! Stalin’s warning is creeping into reality in the U.S.(if one reads the letters between John Adams and Thomas Jefferson to their deaths on this day in history, together, we’ll see how such anger divides and does not conquer [they never spoke to one another after their final spat, but wrote instead, becoming close friends]). Very sad, indeed.

We know from the past 9 years that the Stock Exhange was "enabled" to lie … you are right, and I’m not so sure it’s on the mark, either. The head of PIMCO had some interesting advice last night on just that topic.

Have a great evening - or not, rest. ;-)

By C jay on 07/04/2009 4:04 pm

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I haven’t read any book similar to what you describe. I tend to read more history than business books. Business is current events - news, tradepapers, web stuff, along with talking with those involved and/or affected. (Is it any surprise that the first regularly scheduled direct flights from the US to China were from Detroit?)

By Karen R on 07/04/2009 7:32 pm

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I was born in Detroit, Karen - the greatest city in the world (then) to grow up in. We used to skip school to go to the museums! Now find another city like that! It’s a wreck now, I agree.

One evening, in the mid-90s, while I was consulting there, I met a friend who flew in from Oregon at the Ponchetraine hotel (who secure a suite for us to have dinner with a string trio). As I left to head out 94 for Ann Arbor about 11 PM I became disoriented, and ended up by Briggs Stadium. When I saw the devastation for blocks and blocks, an area that I used to live to go to with family for the "games," I wept.

As I turned onto 94, heading the right way, wiping my eyes, I turned on the radio - the song playing was "This Used To Be My Playground." I had to pull over, and call my friend who gave me such a lovely evening — I was busy, and at first didn’t think I’d even have time for his planned get-together — I thanked him for the wondrous surprise, his effort to see me in between hours on the consult, and for just still "being there." What an experience that was.

Now, that book, I’ll find the thing, but it was more a social comment on our nation’s recent path (the last 15 years …). It’s here some place.

By C jay on 07/04/2009 8:53 pm

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Hi Karen………when you say the US abandoned manufacturing, are you referring to the tax incentives available for companies who take their operations overseas, so that not only do the companies enjoy lower wage cost but lower taxes to boot?

Personally, I think we need to impose higher taxes and import fees on American companies who operate in foreign countries.

By MK P on 07/05/2009 8:39 am